May 18, 2015
ESPN.com reports that a Nevada state district court judge has reversed and remanded the Nevada State Athletic Commission’s lifetime ban and $70,000 fine issued against Wanderlei Silva last year. Judge Kerry L. Earley determined that while the NSAC had jurisdiction over Silva, the punishment was “arbitrary, capricious and not supported by substantial evidence.”
Judge Earley’s decision orders a new hearing by the commission to find a proper punishment for Silva’s violation of evading a random drug test in lead-up to his fight against Chael Sonnen at UFC 175.
The court indicated that a decision would be handed out by May 11th but the decision came a week later.
According to the ruling (as reported by ESPN, we will attempt obtain a copy), the court agreed with the NSAC’s argument that it had jurisdiction over Silva but not with the method the commission determined the penalty. If you watched the commission hearing, you may recall that there was an ad hoc moment where the commission determined a penalty based on what they knew of Silva’s pay.
Silva’s attorney, Ross Goodman, applauded the reversal of the suspension and the re-hearing but may consider an appeal of the ruling with respect to jurisdiction.
As a quick procedural background as to how the decision made its way to state superior court, as in many jurisdictions, the process for appeal of an administrative decision is to the state court.
While I believed that the court may have found jurisdiction, Goodman’s potential appeal may not be as far-fetched as you might think. The ruling means that we should see the commission re-evaluate Silva’s penalty. It’s unlikely it will be able to impose the recommended guidelines it passed last Friday although one might surmise the commission will have this in the back of their minds. Ironically, the NSAC discussed not wanting its decision to be overturned at the hearing (and cited in Silva’s petition for judicial review) for being “outside of the norm” of what the commission has done in the past. It looks like the court has found it did overreach with its penalty.
May 14, 2015
MMA Junkie reports that the Federal Trade Commission has reopened its investigation against Zuffa and has contacted people within the MMA industry about Zuffa’s business practices.
The government investigation occurred after Zuffa acquired Strikeforce. The agency evaluated Zuffa’s financial documents and talked to UFC execs but the investigation yielded nothing to command a further inquiry at the time. The FTC closed its investigation of Zuffa in early 2012. MMA Payout’s FOIA request for documents related to that investigative led to nothing of substance except for a couple form letters which indicated that it “reserved the right to reopen the investigation if it deemed it necessary.”
It appears that it was necessary.
With the filing of the antitrust lawsuit by former UFC fighters, it appears that the FTC will take another look at Zuffa business practices.
The news comes out a day after Zuffa filed a motion to stay discovery pending its Motion to Dismiss plaintiffs’ complaint.
The reopening of the investigation may help plaintiffs in its position that its complaint is valid. It also will help with opposing Zuffa’s motion to stay discovery. The FTC investigation may help plaintiffs with the argument that Zuffa’s financial documents are relevant to the litigation as you might expect an anticipated discovery fight over that information. While the investigation by the FTC and the antitrust lawsuit are independent of one another it is clear that you might infer a tie-in between the two. We will see how both lawsuit and government investigation proceed.
May 13, 2015
Zuffa has filed a Motion to Stay Discovery in the antitrust lawsuit filed by former UFC fighters. According to the papers filed Wednesday, Zuffa requests that discovery is halted until the court addresses Zuffa’s Motion to Dismiss and Motion to Transfer Venue.
The Motion to Stay Discovery is set to be heard by the Honorable Edward J. Davila on September 10, 2015 in U.S. District Court in San Jose.
Essentially, Zuffa states that the discovery process is costly and burdensome and that it should not have to start the process until the court determines its Motion to Dismiss which shall be heard on July 23rd. Alternatively, it argues that discovery should be pending until the court decides the Motion to Transfer Venue (oral argument was heard May 7th).
According to the filing, plaintiffs’ counsel and Zuffa’s counsel met and conferred on April 15th to determine a pretrial plan for the case. You can see the results here. The parties agreed to mediation to occur no later than September 30, 2015. However, the parties disagreed as to whether discovery should commence. Plaintiffs sent Zuffa 59 Requests for Production of Documents on April 26th per Zuffa’s Motion to Stay. The parties have exchanged its preliminary witnesses on May 8th.
Per the Motion to Stay Discovery, Zuffa argues that its Motion to Dismiss would resolve all issues if the Court grants the motion. Thus, discovery would be a moot point. It argues that it should not have to begin working on discovery that it describes as “extensive, burdensome and costly.” The requests appear to seek a voluminous amount of financial information from Zuffa. It also seeks a broad amount of information.
The Motion refers to a two-step test used by federal courts in California for evaluating a request for stay during the pendency of a dispositive motion (i.e., Motion to Dismiss). First, the pending motion must dismiss the entire case (or the issue in which discovery is aimed). Second, whether the court may determine the motion without the discovery. Zuffa states the court can dismiss the case without the need for conducting discovery.
Here, Zuffa obviously is seeking to dismiss the entire case. In addressing the second part of the above test, Zuffa states that since Plaintiffs’ claims rely on Zuffa’s contracts, it argues that those are in the hands of the plaintiffs already and there is no need for discovery. It also states that the financial information sought in its requests are not needed before Zuffa’s Motion to Dismiss.
And so begins the discovery fight that occurs in almost every civil lawsuit. You can see that Zuffa does not want to do unnecessary work it believes is extensive and costly while at the same time provide plaintiffs with the type of information that may allow them to amend their Complaint. Plaintiffs believe that they have a right to start the litigation process and the stay is merely a stall tactic so that Zuffa does not have to hand over financial information that may fall into the public eye. As someone that has been on both sides of the discovery fight, this is a close call for the court. While plaintiffs want this case to move expeditiously and believe that they have a right to discovery, Zuffa believes it would be unnecessary to conduct discovery if the court dismisses the case.
Whatever the ruling, you can expect a fight over Zuffa financial documents and whether or not the requests are overbroad, relevant and/or necessary with respect to the current lawsuit.
May 9, 2015
Golden Boy Promotions LLC and boxer Bernard Hopkins filed suit this week against Al Haymon and a variety of Haymon’s businesses and associates with respect to violations of the Sherman Antitrust Act. The lawsuit was filed in federal court in Los Angeles.
The lawsuit paints the picture that many competitors have accused Haymon of for some time. He is attempting to monopolize professional boxing in the United States and drive out all competition. The lawsuit accuses Haymon of “blatantly” ignoring the “firewall” imposed by federal (specifically the Muhammad Ali Boxing Reform Act) and state laws which preclude a manager also acting as a promoter for a fighter. The lawsuit claims that he has forbidden “hundreds of boxers” he manages from signing with another promoter.
The lawsuit names Waddell & Reed Financial, Inc. and Waddell & Reed, Inc. as defendants that financed and aided Haymon through an investment fund that funded the boxing enterprise. Plaintiffs claim that these defendants provided more than $400 million dollars to finance Haymon.
The lawsuit claims that Haymon, et. al have created a “tying” relationship in violation of antitrust laws. This is done through agreements affecting to separate relevant markets. The first market is for management of Championship-Caliber Boxers and the market for promoters. As described in the Complaint, the management market is the “tying” market whereas the promotion market is the “tied” market. Essentially, the fact that Haymon manages so many fighters it affects the promotions market since he has exercised control over the direction of each fighters’ career.
The Complaint filed by Bertram Fields of Greenberg Glusker Fields Claman & Machinger, LLP in LA states that Haymon acted as an unlicensed promoter. In fact, the Complaint cites an LA Times article which states that Haymon was the “main promoter” for the Floyd Mayweather-Manny Pacquiao fight. The scheme articulated by Plaintiffs is that Haymon is using his dominance in one business to “take over and monopolize another business that federal and state law prohibit them (Haymon, et. al) from even entering.”
Plaintiffs are seeking damages in excess of $100 million which, according to relevant statutory law, could lead to treble (3 times) damages. Thus, the lawsuit could be for more than $300 million. In addition, Golden Boy is seeking an injunction from Haymon’s continued promotion. This possibly could mean the severing of his multi-network affiliations with airing Premier Boxing Champions.
Perhaps not a coincidence, the Oscar de la Hoya led Golden Boy filed the lawsuit on Cinco de Mayo. Plaintiffs seek a jury trial.
We will have more on this in the weeks to come but if you were to compare this lawsuit to the one filed by the former UFC fighters, I would tend to believe that this antitrust claim has much more of a bite to it. Although it’s likely to sustain a Motion to Dismiss from Haymon’s lawyers, I think it has a better chance of making it to the discovery stage of the lawsuit. We shall see how this will go.
May 7, 2015
Late last week, Zuffa filed its Reply Brief in support of its Motion to Dismiss the Plaintiffs’ Complaint in the class action antitrust lawsuit filed in Northern California. The Reply Brief addressed issues from Plaintiffs’ Opposition. The hearing is set for July.
First we take a look at the Opposition Brief.
In Plaintiffs’ Opposition, they focused several issues including rebutting Zuffa’s contention regarding the definition of “Elite MMA Fighters” with respect to it as a key input for MMA Promotions, the UFC engaged in Anticompetitive conduct to exclude competitors and monopsonize the market for the defined Elite MMA Fighters, the UFC dominates the relevant markets and the UFC’s scheme caused antitrust injury to Plaintiffs.
In its Opposition brief, the Plaintiffs argue it sufficiently outlined that the UFC has monopoly and monopsony power.
Secondly, it contends that Plaintiffs “plausibly allege exclusionary conduct in violation of Section 2” of the Sherman Antitrust Act. It argued that the UFC’s conduct “substantially foreclosed competition.” Plaintiffs state that this was done through its exclusionary contracts with respect to its fighters, identity rights (e.g., exclusive use of a fighter’s images in such things as video games) and through “exclusive dealing agreements with venues, sponsors and distributors.”
Plaintiffs contend it sufficiently alleged anticompetitive effects resulting in an antitrust injury.
In order to survive a Motion to Dismiss, a party must have allegations that, “taken as a whole, are facially plausible” according to the Supreme Court case of Bell Atlantic Corp. v. Twombly. The Twombly case, decided in 2007, changed the way federal courts analyze complaints as the rule prompted more detailed. In the Opposition, Plaintiffs contend it laid out direct and circumstantial evidence to support its allegations in its Complaint.
Some notable arguments in its Opposition:
- It argued that the distinction between “Elite” and non-Elite fighters is well understood in the industry. In its argument regarding the definition, Plaintiffs cite the case of International Boxing Club of New York, Inc. v. United States. In this antitrust case, the Supreme Court affirmed a market limited to “championship” boxing contests rather than all professional boxing contests. Thus, Plaintiffs argue that in the past, courts have upheld a relevant market based on a quality distinction of one league over another. To further support its claim, it notes in a footnote that investment analysts such as Moody’s describes UFC fighters as “elite” as well as fan blogs and web sites.
- Plaintiffs plausibly allege direct evidence of monopoly and monopsony power. The Plaintiffs contend that it need not cite circumstantial evidence as prior cases have found direct allegations sufficient.
- Plaintiffs rebut the argument claimed by Zuffa that it must provide a number with respect to the amount it has foreclosed competition stating that it indicated that it foreclosed competition 100%, but in the alternative, it cites cases stating that dispute about the degree of foreclosure need not be resolved on the pleadings.
- Plaintiffs argue that Zuffa misinterprets the law with respect to the need it must show specific facts as to the extent of the UFC’s use of exclusive contracts with MMA fighters and that Plaintiffs must separately show foreclosure of competition by means of the exclusive contracts. In this case, Plaintiffs argue it may allege foreclosure as a result of cumulative conduct and that the contracts are a portion of the “chokehold” the UFC puts on the market for MMA events.
In its Reply to Plaintiffs’ Opposition, Zuffa hammers home the argument that the Plaintiffs’ Complaint was not sufficiently pled in accordance with Twombly. It first argues to the Court about the sheer cost in discovery that an antitrust case encompasses and that was one of the reasons why the Supreme Court decided the way it did in Twombly. It then argues that Plaintiffs’ Opposition fails to explain with plausible facts 1) any anticompetitive conduct by Zuffa, 2) that such conduct caused substantial foreclosure in any relevant market, or 3) that Plaintiffs suffered antitrust injury as a result of anticompetitive conduct.
In addition, it argues that Plaintiffs’ “Monopoly Broth” theory does nothing to support its case. It also states that the allegations fail to show UFC’s Conduct resulted in substantial foreclosure and that it failed to properly plead defined relevant markets.
Among the key takeaways from Zuffa’s Reply Brief, Zuffa characterizes Plaintiffs’ argument that the alleged cumulative conduct equates to antitrust injury as a “monopoly broth.” This terminology is based on a law review article by a University of Michigan law professor which cites the uses and abuses of utilizing a compilation of issues to make an antitrust case. The law review argues for a corrective use of the “monopoly broth.”
Also in the Reply Brief, it cites cases which supports Zuffa’s contention that courts must still examine the various issues individually. Next, Zuffa argues that Plaintiffs’ claim that the UFC foreclosed 100% of the alleged market for Elite fighters is flawed. They claim that Plaintiffs’ argument is circular since, according to Plaintiffs theory, all fighters under contract with the UFC are “Elite,” few or no fighters not under contract with the UFC are “Elite,” and thus UFC contracts foreclose access to 100% of Elite fighters.
This week, we may find out whether or not the Motion to Dismiss will be argued in San Jose or Las Vegas dependent on the Motion to Transfer Venue. The above is just some of the arguments the parties will argue in July when the Motion will be decided. The Motion to Dismiss may be decided based on whether the Court views Plaintiffs sufficiently pled antitrust injury in its Complaint through its “monopoly broth.” Zuffa articulates in its Reply Brief reasons why Plaintiffs fail to satisfy the Twombly analysis for a sufficient Complaint and appeals to the economic factors in arguing the huge expense this lawsuit will have on Zuffa for a Complaint with little or no concrete allegations. We will see whether the Court takes the position that Plaintiffs’ argument that the compilation of activities by Zuffa equates to an alleged antitrust claim or whether it sides with Zuffa in finding that Plaintiffs fail to provide sufficient facts for its allegations.
May 5, 2015
ESPN reports that two Nevada residents have sued Manny Pacquiao, Bob Arum, Todd DuBoef , Michael Koncz and Top Rank for not disclosing the fact that he had an injured shoulder going into the fight with Floyd Mayweather. The class action lawsuit was filed in federal court in Nevada on Tuesday.
The lawsuit obtained by TMZ Sports lists three counts: 1) Fraudulent Concealment, 2) Statutory Consumer Fraud based on NRS 41.600 and 3) Conspiracy to Commit Consumer Fraud. The allegations relate to violations of the Nevada statutory code by Pacquiao, et al. for not disclosing a shoulder injury suffered by Pacquiao while in training for the May 2nd fight. Pacquiao revealed the injury in the post-fight press conference.
The lawsuit cites the Nevada state code related to deceptive and unfair trade practices. The plaintiffs claim that they either purchased tickets and/or the PPV. They claim that Pacquiao misrepresented to the NSAC that he was not injured.
Michael Koncz told the NY Times that he filled out the questionnaire incorrectly. The Pacquiao camp indicated it had told USADA about the shoulder injury but not the NSAC.
Even before the lawsuit was filed, the Nevada State Athletic Commission indicated that it would investigate Pacquiao’s comments and who knew what, when. Pacquiao did not disclose on an NSAC pre-fight questionnaire that he had an injury although he had one. Kevin Iole of Yahoo! Sports tweeted out the questionnaire.
— Kevin Iole (@KevinI) May 5, 2015
In all likelihood, a Motion to Dismiss will be filed by Pacquiao, et al.’s representatives. This was stated as much by Pacquiao’s lawyers. It also appears that this lawsuit should be filed in state court since it relates to questions related to Nevada rules. The lawsuit was bound to occur but this seems like one that will either be dismissed or settled quickly. While the NSAC may investigate the matter, I would not expect a Pacquiao suspension. At this point, the 36 year old Pacquiao is slated for shoulder surgery for a torn rotator cuff and is out 9-12 months. Even then, he’s expected to fight in Macau again so even if the NSAC were to assess a penalty/suspension, I doubt that does much. But, if you were to be cynical (or practical) about the situation, Pacquiao is a big economic driver for the state when he fights and it’s unlikely the NSAC does anything to prevent Pacquiao from fighting in the state.
May 1, 2015
There are reasons why Al Haymon never speaks, one of those may be to prevent the threat of litigation. A recent article about Haymon’s Premier Boxing Champions may bring on an antitrust lawsuit involving rival Golden Boy Promotions as chief plaintiff.
A recent Sports Business Journal article featured Haymon’s PBC and went over how funding was structured. Although Haymon did not provide comment for the article, factual information in it allegedly strengthened the argument that Haymon’s business model for PBC violates portions of the Muhammad Ali Boxing Reform Act.
A draft of the Complaint has been viewed by SI.com and it appears that Golden Boy Promotions is seeking a temporary restraining order and then a permanent injunction against his business practices that violate state and federal laws. It also requests monetary damages against Haymon.
The claim is that Haymon is using his monopoly as a boxing manager to create another monopoly for promoting TV fights.
Golden Boy is hush on if and when this lawsuit may be filed.
Notably, the SI article includes a letter dated April 28, 2015, from the Association of Boxing Commissions (“ABC”) to the Department of Justice in which it claims that Haymon is in violation of the Ali Act. Essentially, through his controlled companies Haymon is acting as manager and promoter which the ABC claims to be a violation of the “Firewall provision” of the Ali Act (specifically section 5(b) of the Act). ABC also calls into question the contracts Haymon fighters must sign. Essentially, ABC believes that they are in “restraint of trade” and “contrary to public policy” as the contracts exceed 12 months. A footnote in the letter notes that UFC, Bellator and other MMA promotions have this contractual model. It also notes that MMA is not covered by the Ali Act.
This will be an interesting lawsuit and with the Zuffa antitrust lawsuit ongoing, we can see some major waves happening in the business of combat sports. Haymon’s boxing business model is unique and received much scrutiny by rival promoters. There have been attempts in the past to sue Haymon but those were summarily dismissed and/or settled. If Haymon and PBC are sued, we may see some interesting information divulged from the factual discovery process in the lawsuit. It could also overturn the current wealth of boxing on multiple networks by PBC. MMA Payout will keep you posted.
May 1, 2015
MMA Junkie reports that an attorney for Jon Jones threatened to sue the Nevada State Athletic Commission for releasing results of Jones’ drug test which revealed his positive test for using cocaine.
Ross Goodman wrote on behalf of Jones claiming that the fighter’s privacy was invaded due to the release of the drug test results to the media. Per Junkie, Goodman wrote the commission on behalf of Jones stating that they were considering a civil lawsuit against the NSAC and its board members for invasion of privacy. The NSAC stated that the test for street drugs was an “administrative oversight.”
Junkie obtained the commission letter of February 13, 2015 in response to Goodman’s letter of January 29, 2015. Notably, the commission indicated that it did not disclose the December 4, 2014 Jon Jones test results to the media, but the UFC did. In the letter written by the Nevada State Attorney General (which represents the NSAC in these matters), it claimed to have broad authority over unarmed combatants within the state as well as permitting out of competition testing of any unarmed combat.
In its letter the commission indicated that it had adopted the WADA Prohibited List but not the WADA Code.
Notably, Goodman represents Wanderlei Silva in his lawsuit against the commission related to the NSAC’s fine and suspension after Silva allegedly evaded a drug test. He also represented Nick Diaz in a lawsuit against the commission in April 2012.
This information is probably not news as Jones was mum (Jones doesn’t comment at 7:27 in the FS1 exclusive on January 19th) when it came whether he would seek action against the commission. With Jones’ latest troubles, a lawsuit against the commission is likely the last thing on his mind. In general, to prove a civil claim for Invasion of Privacy, there must be an intrusion upon reasonable expectations to be left alone. Jones’ claim would likely fall under a claim of “Public Disclosure of Private Facts.” Here, legal action may be taken if an individual publicly reveals truthful information that is not of public concern and which a reasonable person would find offensive if made public. Clearly, the commission argues that 1) it did not disclose the drug test and 2) these are not private facts.
With all of the legal issues facing Jones, this one might be on the backburner until Jones’ criminal issues are clarified.
April 29, 2015
Zuffa has filed its Reply Brief in response to the Plaintiffs’ Opposition to Zuffa’s Motion to Transfer the Venue. Predictably, the big issue will be whether or not the fighter contracts which avail them to the Nevada should be interpreted by the Court.
In its Motion to Transfer Venue from San Jose to Las Vegas, Zuffa lawyers argued that the fighters that filed suit against Zuffa executed contracts or bout agreements which availed themselves to Nevada or Las Vegas as the fora for which a lawsuit would arise. There are variations within the contractual language of the plaintiffs but the gist is that the contract limits lawsuits to Nevada.
The Plaintiffs argued in its opposition that the contracts were not at issue and need not be interpreted to adjudicate this matter. Thus, the forum selection clause dictating forum were inapplicable.
In its Reply Brief, Zuffa argues that a “crucial component” of Plaintiffs’ case is that Zuffa’s contracts improperly restrict competition. Thus, at some point, this will need to be demonstrated through “specific terms of the contracts” and how it illegally bars completion. It contends that Plaintiffs cannot just show market share or a disparity of purses but through fighter contracts. Moreover, it opposes Plaintiffs’ interpretation of the contracts that they impose perpetual and indefinite terms on athletes.
Zuffa cites the Ninth Circuit case of Simula, Inc. v. Autoliv, Inc. which it argues is binding authority. Zuffa argues that Simula advises that when a plaintiff argues antitrust claims which have anticompetitive effects, the contracts must be interpreted. In that case, the Court determined whether an arbitration provision in a contract should be followed. In addition, it determined that with antitrust claims under Sherman Act 1 and 2, the Court would have to evaluate an agreement between the parties.
As Zuffa argument goes, since the contracts will need to be evaluated, Nevada would be the proper forum since it would be “more familiar” with the governing law. It also argues that since the plaintiffs contend that this is a nationwide class action, the relevancy of the location main class representative is not relevant. Thus, it rebuts the argument that Le and others live in Northern California since the lawsuit alleges to be a nationwide class action. It also contends that the residence of the plaintiffs is “substantially diminished” when the plaintiff’s venue choice is not its residence. This would be the case, as pointed out by Zuffa, by plaintiffs such as Brandon Vera and Gabe Ruediger.
As for Plaintiffs suggestion that San Jose is more expeditious to trial and has handled more Antitrust cases, Zuffa summarily dismisses these contention citing they are not elements in determining a motion to transfer venue. It also argues that there is not a strong local interest in the underlying litigation.
The hearing on the Motion to Transfer Venue will be held in San Jose on May 7th.
It will be interesting to see how the court addresses and interprets the Simula case. While the case does point out that it needed to look at the underlying agreement when deciphering an antitrust case, the main issue there was whether an arbitration provision found in the contract applied to the dispute. Thus, the case hinged on whether or not there should be a stay of the lawsuit pending an arbitration or whether that case should be dismissed in its entirety. The point being is that the court did not necessarily decide whether a forum selection clause bound the parties to the contractual provision when the lawsuit is premised upon anticompetitive behavior of a party (i.e. antitrust claims). This is just a cursory look at the Simula case and certainly plaintiffs’ lawyers will analyze the case and make its own distinctions. This is the last filing before the hearing next week so we shall see what arguments are presented by plaintiffs to rebut these assertions. MMA Payout will keep you posted.
April 27, 2015
An arrest warrant has been issued for UFC Light Heavyweight Champion Jon Jones as a result of a hit and run incident that occurred on Sunday in Albuquerque, New Mexico. The charge indicates that Jones left the scene of an accident involving “death or personal injuries.” There was not a death, but in the three car accident, a pregnant woman suffered injuries to her arm and wrist.
UPDATED: Jones in custody.
UFC fighter Jon Jones has been booked into Bernalillo County MDC without incident.
— Albuquerque Police (@ABQPOLICE) April 28, 2015
According to the warrant, an off-duty police officer recognized Jon Jones at the scene as he watches UFC “all the time.” The off-duty officer was in the area at the time of the accident. He observed Jones at the driver’s door area of a silver Buick. Jones was identified as the driver of the Buick. Another witness at the scene observed Jones leaving the vehicle and then returning as he put cash in his pants from the Buick.
MMA Fighting reports that Jones will turn himself in. The MMA Fighting article indicates a pipe with marijuana was inside the car Jones was apparently driving.
Based on the information at hand, the pregnant woman that was injured does not appear to have life threatening injuries or injuries that might affect the birth of her child. Of course, that’s based on information we know at this time and this could change. Hopefully not. Notwithstanding that issue, the news of the latest trouble for Jon Jones is of huge concern for the UFC. The UFC will come under fire for whatever decision it may make with respect to his fight next month. From one perspective, if they keep him on the card while the investigation goes on there will be criticism. If he is taken off at this point, it hurts the card and the UFC business. We will see what happens to Jones in the coming days.